- The EUR/GBP weakens around 0.8515 in the first bars of the European session on Friday.
- French president Macron said that if the 10% US tariff is maintained, Europe will respond by imposing an equivalent to US companies.
- Rightest economic data in the United Kingdom underpin the sterling pound, but the moderate tone of the BOE could limit the gBP’s bullish potential.
The EUR/GBP cross loses traction about 0.8515 during the early European session on Friday. The sterling pound (GBP) is strengthened in front of the euro (EUR) despite the growing concerns about the United Kingdom labor market and a slight deceleration in consumer inflation expectations. The operators prepare for the consumer confidence report of the Eurozone, which will be published later on Friday.
The president of the European Commission, Ursula von der Leyen, said Thursday that the EU is ready for a commercial agreement with US President Donald Trump. However, tariff conversations could fail and said: “All options are on the table.”
French president Emmanuel Macron said in the last minute of Thursday that he favors a rapid and equitable commercial agreement between the EU and the US. The uncertainty about tariffs caused by Trump could weigh on the shared currency in the short term.
The preliminary data of the purchase managers index (PMI) of the United Kingdom Global S&P, published earlier this week, also supported the GBP. The PMI composed of the United Kingdom of Global S&P rose to 50.7 in June from 50.3 in May, above the 50.5 consensus. Meanwhile, the services sector, which dominates the economy of the United Kingdom, registered its fastest growth in three months and exceeded its German and French counterparts in June. This, in turn, elevates the GBP and acts as a wind against the crossing.
However, the moderate tone of the Bank of England (BOE) could limit the GBP bullish potential. The governor of the BOE, Andrew Bailey, warned earlier this week that there are already signs that the United Kingdom labor market is weakening, and emphasized his opinion that it is likely that interest rates continue to fall.
LIBRA ESTERLINA FAQS
The sterling pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most commercialized currency exchange unit (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion a day, according to data from 2022. Its key commercial peers are GBP/USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The sterling pound is issued by the Bank of England (BOE).
The most important factor that influences the value of sterling pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions itself has achieved its main objective of “price stability”: a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, which makes access to credit for people and companies more expensive. This is generally positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing down. In this scenario, the Bank of England will consider lowering interest rates to reduce credit, so that companies will borrow more to invest in projects that generate growth.
Published data measure the health of the economy and can affect the value of sterling pound. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of the sterling pound.
Another important fact that is published and affects the pound sterling is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will benefit exclusively from the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
